Retirement planning is often portrayed as a straightforward formula: save diligently, invest wisely, and enjoy the fruits of your labour. But the reality is more nuanced. Even the most carefully constructed retirement plan can be undermined by overlooked risks or unexpected life events. To retire with confidence, it’s important to identify the less obvious threats that could derail your financial security and to plan for them in advance.
1. Underestimating longevity
We’re living longer than ever before – and while this is good news, it also means your retirement nest egg needs to stretch further. A man retiring at 65 today could expect to live another 17–20 years, while a woman may live another 22–25 years, and these averages do not account for people who live well into their 90s. Underestimating your lifespan could mean running out of money too soon – and the solution is to build your plan around the assumption that you may live longer than you think.
2. Inflation eating into your income
Inflation may feel like a distant concern when you’re still earning, but in retirement, it becomes a silent assassin of purchasing power – keeping in mind that even modest inflation erodes the value of your income and savings over time. A pension that feels adequate today could feel meagre in ten years. As such, your retirement plan must include inflation-beating assets such as equities, and your withdrawal strategy should account for rising living costs.
3. Healthcare costs rising faster than expected
Healthcare is often the largest and most unpredictable expense in retirement, with medical aid and gap cover increases outpacing consumer inflation annually. Added to this is the possibility of needing long-term care, frail care, or specialised treatment – all of which come at exorbitant costs. It goes without saying, therefore, that ensuring you have comprehensive medical cover, a plan for gap funding, and provisions for long-term care are retirement planning essentials.
4. Failing to plan for tax
Many retirees overlook how heavily taxation can affect their retirement income. Withdrawals from retirement funds are taxed according to your marginal income tax rate, while lump-sum withdrawals are subject to a separate, once-off retirement tax table. Without thoughtful structuring, this can result in paying far more tax than necessary. By blending income from different sources—such as drawing partly from a living annuity and partly from discretionary investments—you can create a more tax-efficient drawdown strategy that lightens the tax load and helps preserve your capital over time.
5. Overexposure to cash or conservative assets
It’s understandable that many retirees feel tempted to shift entirely into cash or bonds at retirement, seeking the comfort of stability after years of market uncertainty. However, doing so can unintentionally expose your portfolio to the silent erosion of inflation and drastically limit its long-term growth potential. Given that most retirees need their capital to sustain them for two or even three decades, maintaining some exposure to growth assets such as equities remains essential. The key lies in striking a thoughtful balance—one that manages volatility while still allowing your money the opportunity to grow meaningfully over time.
6. Unexpected family responsibilities
Many retirees continue to provide financial support to adult children, grandchildren, or ageing parents—a gesture that often comes from love and a sense of responsibility. However, these commitments can place significant pressure on a retirement plan that was never designed to sustain multiple generations. It’s essential to set gentle but firm boundaries and to have open, honest conversations with family about what is financially possible. Supporting loved ones should never come at the expense of your own long-term security, nor should your retirement be jeopardised by ongoing dependence on others.
7. Poor timing of withdrawals
Market downturns are an unavoidable part of investing, but drawing too heavily from your portfolio during these periods can have lasting consequences. This phenomenon, known as sequence-of-returns risk, occurs when early withdrawals coincide with poor market performance—leaving your capital depleted before it has a chance to recover. If the first few years of retirement align with a downturn, the impact can be especially damaging. One of the most effective ways to guard against this is to maintain a cash reserve, allowing you to cover living expenses during volatile periods without being forced to sell growth assets at a loss.
8. Not updating your estate plan
Your Will, beneficiary nominations, and trust structures should never be treated as set-and-forget documents. As legislation evolves, families grow and change, and your asset base shifts, your estate plan can quickly become outdated. Regular reviews ensure that your estate plan remains accurate, aligned with your wishes, and capable of protecting your loved ones from unnecessary costs, conflict, or administrative delays.
9. Overlooking lifestyle risks
Retirement is about far more than just managing money—it’s a stage of life shaped equally by your health, relationships, and daily habits. While it’s natural to want to enjoy the freedom to travel or pursue new hobbies, spending too freely in the early years can deplete resources meant to last decades. At the same time, neglecting your physical and mental well-being can shorten those years and lead to rising healthcare costs. The most rewarding retirements are built on balance—one that allows for joy and adventure, but also prioritises sustainability, health, and long-term financial security.
10. Believing your plan is “set and forget”
Retirement planning is not something you do once and then file away. Remember, markets fluctuate, tax laws evolve, and life has a way of changing course when you least expect it – and a strategy that serves you well today may need adjusting a few years down the line. By meeting regularly with your financial planner, you can make sure your plan stays relevant, your risks remain in check, and you continue to take advantage of new opportunities as they arise.
While these pitfalls may seem daunting, most can be mitigated with foresight and careful planning. Retirement security is not built on chance – it’s the product of ongoing discipline, smart decisions, and regular course corrections. By anticipating the unexpected, you can strengthen your financial plan and protect yourself against risks that could otherwise derail your future.
Have a beautiful day.
Sue
